This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. JPX Proposes BIG Changes To TOPIX Rules, Affects IPOs More Than Market
- In 2021 the JPX established new Listing Rules, and in April 2022 introduced new market segments (Prime/Standard/Growth) to much fanfare. Today, the TSE basically said those changes were meaningless.
- Today, the TSE announced proposed new rules for TOPIX constituent selection. There is a 2-month consultation period, then rules come out end-Sep 2024. Expect few changes from the Proposal.
- NextGen TOPIX will be created October 2026. 3-4 dozen ADDs, 500-600 DELETEs to create an index of 1,100-1,200 names. Some obvious large impacts 2+yrs from now, but this changes IPOs.
2. [JAPAN ACTIVISM] – Murakami Group Goes Activisting on Exedy (7278) – Room To Run
- Late May, Aisin (7259 JP) announced a sell-down of its 34% stake in Exedy Corp (7278 JP) – a big non-dilutive offering, pricing 11% below undisturbed. Exedy announced a buyback.
- Announced on the 27th of May, shares fell sharply the next day, it priced on the 3rd, and offering shares traded on the 10th. Then the price started climbing back.
- My first and second pieces argued that buyback accretion, index impact, and change in register shape all meant it was a buy. Activist Murakami agreed, now he has 6.5%.
3. Blackstone Does a BIG Deal for Infocom (4348) – Minorities Get ¥6,060/Share
- 15 weeks ago, a specialised media outlet suggested Teijin Ltd (3401 JP) was in process to sell its stake in Infocom Corp (4348 JP).
- I caught up later, after the stock had run up significantly, but writing bullishly here and here. Since then, the stock is up another 33-35%.
- Today we finally got the announced deal. Blackstone will buy the stock at a valuation of ¥280bn, paying ¥6,060/share for the minority stake, and buying back Teijin’s stake at ¥4,340/share.
4. Great Eastern (GE SP): Inching Towards Suspension
- Back on the 10th May, OCBC (OCBC SP) made a voluntary unconditional general Offer for the 11.56% in life/non-life insurer Great Eastern Holdings (GE SP) not held.
- At a 36.9% premium to last close, the S$25.60/share Offer Price appeared fair. Yet GE has consistently traded through terms, potentially as someone seeks to block delisting, and negotiate terms.
- OCBC has now declared terms final. The IFA says “not fair, but reasonable” – and recommends shareholders accept the Offer. GE will be suspended at the close of the Offer.
5. Guzman Y Gomez IPO: Listing & Index Inclusion Timeline
- Guzman Y Gomez (0817833D AU) has raised A$335.1m in a primary + secondary offering, valuing the company at A$2.23bn. The stock starts trading on the ASX Ltd (ASX AU) today.
- Just over 54% of the shares are escrowed which means there is a lot of stock that will be available for sale on listing day.
- Guzman Y Gomez (0817833D AU) could be added to the S&P/ASX 300 Index in September and there could be global index inclusions in November and December.
6. TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already
- JPX has commenced a market consultation on changes to the TSE Tokyo Price Index TOPIX (TPX INDEX) including expansion of the universe and periodic stock selection.
- Based on current market cap/ liquidity, there could be 38 adds and 447 deletions for the TSE Tokyo Price Index TOPIX, though the changes only start in October 2026.
- The deletions will be phased out of the index in 8 steps that will end in July 2028 and most of the stocks will move to the TOPIX Next-tier.
7. Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease
- Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), will launch the TOB to buy out Mimasu minority holders, as pre-announced 2mos ago.
- Not surprising. They bought in 19yrs ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. It’s too cheap but in 18yrs, I recall zero activism here.
- Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 53%. Then they need a bit to get them to 67% but it should be straightforward.
8. Merger Arb Mondays (17 Jun) – Fancl, Tatsuta, A8, China TCM, GAPack, CPMC, Malaysia Airports, Bapcor
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Fancl Corp (4921 JP), Asia Cement China (743 HK), Ansarada Group Ltd (AND AU).
- Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Alumina Ltd (AWC AU), Nagatanien Holdings (2899 JP).
9. Pref-Centred Dividend Plays with Expanded ISA Tax Benefits in Value-Up Context
- Local stock market focuses on ISA tax benefits expansion; political push for higher tax-exempt limits seen as pivotal event.
- Investors expect dividend stocks to outperform due to ISA tax advantages: tax exemptions within limits and lower 9.9% taxation on excess amounts, boosting ISA-based equity investments.
- ETF influence declining; ISA tax benefits may boost dividend plays, heightening interest in preferred stocks tied to efforts to redeem them, impacting equity costs.
10. Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
- The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
- Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
- There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025.
